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Pandemic will delay, cancel ERP deployments and test vendors
The pandemic will challenge ERP deployments in some unique ways. Travel restrictions are shutting down access to the people needed to plan and implement projects, and remote working may create a hurdle.
ERP deployments may get delayed or canceled by the new coronavirus. Travel restrictions are already taking a toll on projects, and some ERP deployments will not be easy to complete in virtual environments, according to consultants and analysts.
The economic consequences of the COVID-19 pandemic, which is rapidly delivering complications to ERP deployments, will put new pressure on vendors. Customers may seek extension of support deadlines and pricing breaks. The scope of ERP deployments may be reduced.
"There is a lot that has changed," said Jonathan Gross, managing director of Pemeco Consulting, a vendor-neutral ERP project management firm in Toronto.
Travel restrictions are prompting firms to put off certain stages of ERP deployments, Gross said. ERP deployments include designing new business processes, which requires on-site inspections, he said.
"That means walking the plant floor, understanding the industrial design, walking the warehouse and understanding the flow of goods," Gross said.
Virtual ERP deployments pose technical and collaborative challenges. They require video conferencing and large monitors to illustrate processes, along with whiteboards or tablets that can double as whiteboards, Gross said.
"This type of dynamic collaboration is actually quite hard," he said.
Virtual ERP deployments may not work
There are parts of an ERP deployment that can be done virtually, Gross said, "but we are going to get to a point where we are going to have that conference room pilot that is too risky to be done virtually." A conference room pilot is a formal term for validating and testing applications.
ERP projects have high failure rates and often run into problems with delays and cost overruns, according to Jim Johnson, founder and chairman of the Standish Group, a research organization that studies software projects.
If an organization doesn't believe it can do the entire ERP deployment virtually, then "it should not do it at all," Johnson said.
Geoff McPherson, director of software selection at the Panorama Consulting Group in Greenwood Village, Colo., said some firms may be able do the work virtually, but it will depend on their culture and experience with remote work.
"It will be a slower process, and there will be a learning curve of how to work remotely," McPherson said. But firms with ERP deployments will try to hire people with the expertise locally if they can't fly in people, he said.
How will things look in nine months?
"So much has happened in 10 days," McPherson said. "How are things going to look in nine months' time?"
McPherson said some ERP projects will be put on hold and others scaled back. The vendors will have to be more creative about how they sell and respond.
Panorama's most recent survey of ERP deployments reported that last year, 37% remained on premises. The balance is using either SaaS or some other form of cloud deployments."Pricing will definitely have to be looked at," said McPherson, who could see vendors offering added functionality in new pricing packages. Vendors may keep supporting, for instance, older software versions "if companies don't have the bandwidth or resources to keep up to speed," he said.
David Wagner, vice president of research at Computer Economics, can see cloud deployments gaining as a result of the pandemic, partly to reduce the infrastructure management burden.
"Right now, most enterprises require people to keep the lights on," Wagner said. "Those people are in danger or perhaps not even allowed to be where they need to be."
"It may be too late to make some changes now," Wagner said. "You aren't going to replace your ERP or move everything to the cloud in the middle of a global crisis."
But post-crisis, "a lot of companies will be looking around for what they could have done differently to avoid the problems they had this time," Wagner said.
Charles King, an analyst at Pund-IT Inc., expects ERP vendors "will do fairly well during the next couple of quarters as their clients wait to see the extent of COVID-19's economic effects."
"If stability returns by late summer or even fall, 2020 will probably be remembered as a uniquely challenging but survivable experience," King said. But if the problem "becomes more severe or sparks a long-lasting recession, the kinds of market and business failures that dogged IT vendors during the dot-com bust could return with a vengeance," he said.